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Volatility is The next Bubble.
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Event Driven Investor.
  • UPDATE. Fwd: Trading Strategy In Today's Tech Driven Information Age. 0 comments
    Apr 26, 2013 7:47 AM | about stocks: VIXY, SCHW

    (click to enlarge)This is not an attempt in any way to make a recommendation nor am I attempting to advise a financial decision on your part. This is just an informational email on my part. I am not currently licensed to make security transactions or advice clients, due to my series 66 being expired. This is practice for me using real events that I follow. If you really have any questions regarding this investment, please consult a professional.

    ***********UPDATE************

    Dear Friends & Family,

    I am writing to you with regards to my last email about trading strategies that benefit from market volatility. I refer to market volatility movements due to glitches and flash crashes which create unforeseen price fluctuations.

    I am attaching a letter (see FIGURE # 3) from Walt Bettinger, CEO of Charles Schwab Corp, explaining that on Tuesday, April the 23rd, a hacker breached the Company's server and denied service to Schwabs Clients.

    I am also attaching a screen-shot of Schwab's Common Stock price quotes in a line graph, compared to the price graph of the ETF that trades by the Ticker VIXY. (see FIGURE # 4)

    ---VIXY as I mentioned before is a fund that prices to match the Volatility Index ^VIX.

    ---The ^VIX Index is a forward looking measure of Market "Beta" or sensitivity to Market risk

    ---------Market Risks can include any of the following items:

    1.-------------Negative Consumer Sentiment, measured by the Consumer Price Index (NYSEARCA:CPI).

    2.-------------A Recession or worse a Crash.

    3.-------------Rise in Commodity prices. (NYSEARCA:OIL)

    4.-------------Terrorist attack, War, Assassination, the Collapse of the European Union, or a Tsunami hitting Japan (Ocean, or Monetary)

    5.-------------A hacker that breaks into one of Wall Street's largest Brokerages that services mostly Retail Brokerage Clients, and is successively able to completely halt trading operations for a period of time. (Retail Brokerage Clients are regular investors like you and I.)

    My Investment thesis stands on how Market Volatility is measured by this index, and its correlation to negative Event Driven information.

    Take one look at the Graph I attached and you will clearly see my point regarding this Investment. For a moment use your imagination and think about a deliberate hacking attack or failure of a complex algorithm that manages to shut down or haywire the prices of any of the large-cap stocks that make up the world markets, since the ^VIX index is negatively correlated to these prices, it would increase in value, due to instability or greater Beta (Risk Measure).

    Without any doubt, something bad will occur in the future. That is how you price any security. You measure its risk against the risk of risk-free investments. In this case you are hoping for the Mother of all Catastrophes, because risk is your best friend...

    I want to remind you that I am not currently licensed to advice or enter into any security transactions at the moment. If you decide to make any investment decisions please speak to a professional to find out if this an investment you should make.

    Have a good evening,

    CVFIGURE # 3

    (click to enlarge)FIGURE # 4

    Disclosure: I am long VIXY.

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